The Bank of England has just announced that Bank Rate will be cut to 3.75%. Here we’ll look more closely at their decision – and at what it means for the property market in 2026.
Phew. It’s been one of the trickiest years we can remember for predicting interest rate decisions.
This month though, a Bank Rate (the official name for the interest rate) cut looked more likely. And that’s what happened.
In trying to understand why, most experts seem to agree that the UK economy is in definite need of a leg (or two) up at the moment.
The economy shrank again (by 0.1%) in October. Even its biggest fans didn’t forecast much growth.
Unemployment figures aren’t pleasant bedtime reading either. It has now reached 5.1% – the highest for four years.
The inflation rate doesn’t seem to have got the memo though.
Inflation dropped slightly to 3.2% last month. Thanks, say the ONS, to a fall in the cost of cakes, biscuits and confectionery. But inflation is still ahead of the Bank of England’s 2% target.
In normal times this inflation rate would see the rate held or even raised, not cut.
Rachel Reeves’ Budget in November wasn’t well received by business or the public either.
Chances are that helped to nudge the Bank of England towards making the decision they did, to give the economy a bit of support.
What all this might mean for the market in 2026
Most experts are predicting further falls in Bank Rate in 2026.
Goldman Sachs are the most optimistic. They’re forecasting rates could drop to 3% by next summer.
So the cost of taking a new mortgage (or remortgaging) is likely to fall in 2026.
In addition, most experts are forecasting a steady and stable property market for the year ahead.
The Government’s OBR forecast national average house prices will rise 2.5% in 2026. Economic gurus Capital Economics agree with a 2.5-3.0% forecast.
Stable house prices and falling mortgage costs?
That could turn 2026 into a good time to make your moving plans.
So what do we think?
As you know, we like to play it straight.
Some of the doom and gloom in the economy might make the market a bit chilly over the next few weeks, but that’s not unusual at this time of the year.
That said, here in West Wales we have seen a good uplift in viewings and sales since the November Budget, and we do normally welcome a very busy start to January after the Christmas break.
We are also optimistic for a busy spring.
Assuming mortgage costs drop further, the economy turns a corner, and if house prices continue to look good value then moving will continue to be on the cards for many.
As always, we’ll keep you updated with the latest market forecasts here.
We hope you’ve found this post interesting. If you know someone who might find it useful please share it with them. And finally, we wish you a great Christmas break and a very happy new year.